MW: Futures sharply higher as investors stay bullish, await GM
MADRID (MarketWatch) -- U.S. futures jumped sharply Monday, setting a bullish tone for Wall Street on investor confidence that the worst of the financial crisis and recession is over, and also owing to some relief over General Motors Corp., with no big surprises expected from the automaker's bankruptcy filing due in just a couple of hours.
For the first trading day of June, S&P 500 futures rose 16.3 points to 934.40, the Nasdaq 100 rose 18.5 points to 1,454 and Dow Jones Industrial Average futures rose 124 points to 8,612.
The Dow Jones Industrial Average (INDU 8,500, +96.53, +1.15%) surged late Friday, ending up 96.53 points, or 1.1%, at 8500.33 and up 4.1% for all of May. The Dow rose more than 100 points in the last hour of trading as investors decided to take money off the sidelines and jump in.
DJIA 8,500, +96.53, +1.15%
"The momentum for the opening seems relentless," said David Buik, market analyst with Cantor Fitzgerald, who added that it's also looking a little too frenzied to him. "In the last 20 minutes on Friday the S&P went from 908 to a high of 920.
"Yes, it was month end and a number of 'missed the boat money managers' had to get invested, but these last 20-30 minute rocket rides have been going on for the last two months, especially when the market reaches a breakdown point the powers that be are not letting this market correct," Buik said.
"It appears that the same mistakes are being made as those made in not allowing the economy to correct when it needed correcting at the turn of the century. A lack of correction often comes with a bitter price to pay."
Analysts also pointed to the "Coppock Guide," which has signaled bull markets in all but one occasion since World War II and is now saying U.S. stocks are worth buying for the first time in six years. The Guide is a momentum indicator that filters out shorter-term market swings in order to focus on the market's long-term trend.
The big focus for Monday is GM (GM 0.75, -0.37, -33.04%) , due to file for Chapter 11 protection from creditors in federal bankruptcy court in New York, wiping out billions of investment dollars and putting a bankruptcy court judge in charge after failing to meet U.S. government demands that it come up with a plan by June 1 that would return it to profitability.
The filing also paves the way for the government to take a majority stake of about 60% in the Detroit carmaker during what is hoped will be a 60-to-90-day trip through bankruptcy. The company is also expected to name turnaround executive Al Koch as its new chief restructuring officer, The Wall Street Journal reported Sunday, citing people familiar with the matter.
Max King, strategist with Investec Asset Management in London, said they have mixed feelings about the GM outcome. "On the one hand, we are encouraged by the fact the U.S. administration appears to be taking a somewhat harder line than they might have done rather than just rolling over and bailing them out.
"On the other hand, there's quite a lot of money being pumped into keeping three lame ducks (Chrysler, Ford (F 5.75, +0.19, +3.42%) and GM) on the road. GM news is better than our worst expectations and not as good as what we'd hoped for," he said.
More U.S. data are due out as well, and hope is that they will continue to show some so-called green shoots for the U.S. economy. Income and spending data for April are scheduled for release at 8:30 a.m. Eastern, while the Institute for Supply Management manufacturing index for May is due at 10 a.m.
Strength in commodity stocks was commandeering trading to start the week in Europe and Asia, along with optimism carrying over from U.S. markets. The pan-European Dow Jones Stoxx 600 index (ST:SXXP 212.59, +4.38, +2.10%) was up 2.1%, while the Hong Kong's Hang Seng Index rose by as much as 3.7% to as high as 18,843, a more than eight-month high.
"Markets on Monday have stormed ahead in Asia and Europe on the back of a growing belief that the worst of the global recession is past," said Stephen Pope, chief global market strategist, Cantor Fitzgerald Europe.
"If one considers the miners ... we know that this is arguably the most capricious sector in the financial spectrum as it tends to be the leading or the lagging group on days when markets are either up or down respectively," he said, noting that metals and miners are up 6.4% as a group in Europe on Monday, while steels are up nearly 5.4% and autos, up 4.7%.
Away from stocks, crude futures were up $1.76 to $68.07 a barrel, while gold futures were up $8.20 to $988.50 an ounce. The dollar was weaker across the board, with yields on 10-year U.S. Tresaury bonds up eight basis points to 3.54%.
